The total market value of all goods and services produced in a nation’s economy (excluding foreign investments) is its

d) GDP

In 2002, the United States has a GDP (Gross Domestic Product) of $10.5 trillion. What does that mean?

b) It is the total money value of all goods and services produced in the United States.

Why are economists always so concerned with GDP?

b) GDP is the most accurate way to determine if the economy is performing well.

Economic growth is

b) growth in a country’s GDP

In the 3rd quarter of 2003, the economy of the United States grew by 8.2% because of

d) all of the above

Economic growth can reduce poverty by

d) all of the above

Is GDP a good measure of the prosperity of the average person?

d) No, GDP does not consider the size of the population.

If per capita GDP is growing, does that mean that everyone is better off economically?

c) No, per capita GDP is only an average figure — it does not mean everyone is more prosperous

How do we precisely measure the standard of living in a nation or economy?

d) No one number is enough.

Because different nations have vastly different numbers of people living in them, Gross Domestic Product (GDP) is a very poor way to compare the economic well being of people in different countries. What economic statistic is used by economists in its place?

c) weath total

Which of the following is the economic term that indicates that figures have been adjusted for inflation?

c) real

Gross Domestic Products (GDP) expressed with no adjustments for inflation is called the?

a) nominal GDP

Which of the following is the economic definition for recession?

d) Two or more quarters (6 months or more) of declining real GDP is a recession.

Entrepreneurship is ESSENTIAL to a dynamic market economy because?

a) it leads to the growth of new businesses

An established company might want to encourage an entrepreneurial culture in order to..?

d) all of the above

Companies can encourage hard work and dedication from their employees?

c) through issuing stock options

Nick wants to be an innovator. This means that he should

b) turn a new product into an actual product

If Patrick wants to be an entrepreneur, he should

a) identify and exploit a new business opportunity

To get financing, entrepreneurs generally need a business plan. Which of the following is usually included in a business plan?

d) all of the above

Who usually provides funds for the early stages of a start-up business?

c) family and friends

Why do venture capitalists supply money and other support to entrepreneurs?

b) They share the rewards if the company is successful.

In the later stages of a business that requires a lot of funding, the entrepreneur can seek financing from?

b) financial markets

Which of the following is a risk taken by entrepreneurs?

a) personal bankruptcy

New trade agreements are expected to

b) encourage entrepreneruship

The government can encourage more business start-ups by

a) cutting taxes for businesses

A decline in interest rates is expected to

c) increase economic growth

To encourage capital investment by the private sector, governments can

a) improve the country’s physical infrastrucature

To increase human capital, governments can provide

d) all of the above

Advances in technology generally result in

a) greater productivity

Ireland is a popular destination for American businesses and investors because

c) it has business-friendly policies

Other things being equal and unchanged, a jump in productivity growth is expected to boost

d) all of the above

Other things being equal and unchanged, a jump in inflation is expected to

c) raise the country’s cost of living

Other things being equal and unchanged, a jump in crime rates is expected to have

a) a negative impact on the standard of living

Consider two countries with exactly the same GDP. There is exactly the same number of people living in each country. Call them country A and country B. If country A’s GDP grows faster than country’s B’s then country A’s per capital GDP.

c) will grow faster than the per capita GDP of country B

Economic growth and standard of living can be low in a country because of

d) all of the above

A decline in a country’s economy will increase

a) poverty

How do capital and human capital increase the GDP, wealth and income of nations?

b) Capital and human capital increase the productivity of land and labor.

Which of the following do economists use to determine if an economy is healthy or if it is in a recession or depression?

b) GDP

Who or what determines a country’s GDP?

a) All of the resources of production together produce the GDP.

Is comparing the GDP of two nations the best means of comparing how the average person is doing economically?

c) No, per capita GDP is a much better measure of how people are doing economically.

Is everyone in a country with a greater per capita GDP wealthier than those in a nation with a lower per capita GDP?

d) No, the distribution of income must also be considered.

How do people determine what country has the best economy?

d) Standard of living is usually used to determine the best economic system.

How can economists precisely compare the standards of living in different countries?

a) They cannot because standard of living depends on what people consider to be important.

What is the essential difference between real and nominal figures in economics (such as GNP and GDP)?

c) Real figures have been adjusted to eliminate the effects of inflation, while nominal figures are stated in the current value of the money.

Why do economics say that real Gross Domestic Products (GDP) should be used to measure growth in an economy (and not nominal GDP)?

b) Growth in real GDP is the only true indicator of whether or not an economy is growing.

Why is real Gross Domestic Product (GDP) used to determine if the economy is in recession — why no use unemployment figures as the measure?

d) Real GDP can be accurately and quickly determined, while higher unemployment figures do not always indicate recession.

Each of the following inventors developed machinery that would lead to be increased productivity of farmers between 1790 and 1840 EXCEPT

c) Samuel Morse

In the 1870s, an entrepreneur used his entrepreneurial skills to be the first to build steel plants using the Bessemer process, a new steel-making process. This gave his steel company an advantage in the emerging U.S. steel industry. This entrepreneur was

d) Andrew Carnegie

In 1882, John D. Rockefeller organized a trust that soon gained a monopoly of the oil-refining business in the U.S. This trust was the

a) Standard Oil Trust

The _______ century marked a period of considerable entrepreneurial activity with inventions and developments by Thomas Edison, Alexander Graham Bell, Christopher Sholes, Etienne Lenoir, Samuel Morse, and many others.

c) 19th

Bill Gates, one of the most successful entrepreneurs of the 20th century, built a computer software company into a corporation that has frequently drawn the concern of competition regulators. In 2000, a U.S. federal judge found Microsoft Corporation guilty of

a) antitrust violations and ordered its break-up

According to the chart, the growth rate for female-owned sole proprietorships grew much ______ than their male-owned counterparts in terms of number of businesses, gross receipts, and new income; however, the shares of female-owned sole proprietorships’ receipts and net income in total were significantly ______ than their share of the number of businesses.

d) faster, smaller

Which conclusion can be drawn about the countries listed in the chart?

a) Bangladesh has the lowest standard of living.

Which group of countries had a GDP per capita of between 5,000 and 10,000 international dollars in 1998?

c) 3

According to the chart, which country experienced the greatest rate of economic growth but continues to have relatively low standard of living?

a) Malaysia

According to the chart, what percentage of all firms in the U.S. in 2003 employed 19 or fewer employees?

a) approximately 76%

A firm owned by a single person who shares profits and losses with no one else is a

c) sole proprietorship

A firm jointly owned and run by two or more people who share all profits and losses is a

a) partnership

A business firm with many owner who each own shares of the company is a

d) corporation

A firm that does not seek to make money is a

b) not-for-profit organization

What are corporate stocks?

c) Corporate stocks are the paper certificates representing the shares of ownership in a corporation.

Which of the following acts for the stockholders to set policies, make major decisions, and hire top corporate management?

c) the board of directors

What are the powers and responsibilities of the top management of a corporation?

a) They manage the day-to-day operations of the corporation.

What are stock dividends?

c) They are a portion of the corporation’s profits that are given to stockholders.

It is cheaper per unit to produce a large number of product than it is to produce a small number.

Is there a term to describe industries where it is more expensive per unit to produce a large number of a product than it is to produce a small number?

d) Yes, “diseconomies of scale.”

What is the term that describes the fact that owners of sole proprietorships and partnerships are totally personally responsible for all the debts of their firms?

c) unlimited liability

What is the term that describes the fact that owners of corporate shares or stocks do not risk anything beyond their original investment?

b) limited liability

What is labor in economics?

b) Labor is one of the three resources of production, like land or capital.

How do firms purchase or pay for the labor that they use to produce their goods and services?

c) Labor is purchased with wages or salaries.

Why are there such great differences in the wages and salaries pain to different people?

b) A worker’s human capital is the greatest determinant of his or her wage or salary.

18) Are there economic reasons why a nation supports education and training?

d) Yes, much of the human capital of a nation’s workforce is acquired in school.

Is a worker’s human capital and his or her resulting productivity the ONLY determinants of that person’s wage or salary?

d) No, like all resources, supple and demand also affect how much a worker is paid.

Why are most firms sole proprietorships — what advantages do they have over other types of organizations?

a) They are easily formed, management is in one person’s hands, and profits are not shared.

What advantages does a partnership have over a sole proprietorship?

c) Partnerships usually have more management expertise and more financial capital.

What is the main reason almost all large companies are corporations?

c) Corporations can attract millions of dollars of financial capital from many people because the owners have limited liability.

Why is it usually safer to invest in corporate stocks than to become a partner in a business?

d) Partnerships have unlimited liability, while corporations have limited liability.

How do corporate bonds differ from corporate stocks?

d) Bonds are certificates that represent money loaned to corporations, while stocks are certificates that represent the shares of ownership in a corporation.

25) If stockholders own the corporation, how do they control and manage it?

b) Stockholders elect the board of directors and that board then oversees the corporation.

Who is responsible for a corporation’s debt?

c) the corporation

How are stock prices determined?

d) Supply and demand set stock prices.

Why do investors buy stocks?

c) Stockholders are paid dividends from the company’s profits.

How is the trading in the stocks of major corporations regulated?

c) Stocks are traded on respected stock markets which are regulated by governments.

30) Of the three resources of production (land, labor, and capital), how does capital most differ from the other two?

d) Capital is produced by humans, while land and labor are not.

Why has there not been a successful new American auto manufacturing firm formed in over 80 years?

a) The economies of scale in the auto industry make it almost impossible for a new firm to gather enough financial capital to be successful.

Is it possible for to become too big to be competitive and earn a profit?

c) Yes, growing firms can face diseconomies of scale.

How do charities avoid paying the taxes that other firms must pay?

c) Once they are licensed as not-for-profit organizations, they are exempt from most taxes.

Which statement BEST explains the role that labor has in the production of goods and services?

c) Land, labor, and capital are all resources of production necessary to produce goods and services.

Why are some workers paid more than others?

b) Pay is mostly determined by supply and demand with the number of workers determining supply and the value of the work performed determining demand.

In economic terms, how does a worker make himself or herself more valuable to employers?

d) Increase his or her human capital.

37)Why do the workers of some nations have more human capital than those of other nations?

b) Some nations invest more heavily in education and training?

38) The violent strike at Carnegie Steel Company’s plant in Homestead, Pennsylvania in 1892 ended in a defeat for union members. The workers’ defeat

a) stopped the growth of labor unionism in the steel mills for years

39) In 1894, the president of the American Railway Union (ARU) called on all American railway workers to support the Pullman workers at the Pullman Palace Car Company of Chicago. The president of the ARU was

d) Eugene Debs

The American Federation of Labor (AFL) was one of the first federations of labor unions in the United States. It was founded in 1866 by

c) Samuel Gompers

The Coal Strike of 1902 ended after President Theodore Roosevelt pressured mine owners to accept arbitration. This action was highly unusual because

b) earlier presidents has sided with business owners and often sent troops against strikers.

In which state will you likely find the highest paid workers?

d) number 2

Sole prepreitorships

a) are a large percentage of businesses but bring in the smallest percentage of total business revenue

In terms of business done (measured by percentage of total revenue),

d) corporations are a significant part of the U.S. economy

According to the chart, which group or person has the most power in a corporation?

c) the stockholders

According to the chart, the U.S. economy

a) is dominated by the service sector

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